Ecuador threatens environmental squeeze

Ecuador President Rafael Correa, who was sworn in last January and is a close ally of Venezuelan President Hugo Chavez, said he might cancel contracts of foreign oil companies that harm the environment.

Feb. 8, 2007

2 min read

Peter Howard Wertheim
OGJ Correspondent

RIO DE JANEIRO, Feb. 8 -- Ecuador President Rafael Correa, who was sworn in last January and is a close ally of Venezuelan President Hugo Chavez, said he might cancel contracts of foreign oil companies that harm the environment.

Analysts see that as a threat to a Petroleo Brasileiro SA (Petrobras) block in one of the largest ecological reserves in the world, Park Yasuni.

Petrobras in 2004 won a license to explore Block 31, part of which is in a reserve considered one of the world's most biologically diverse areas and home to primitive tribes.

Petrobras officials were not immediately available for comment, but the company has said it is using modern technology to avoid damaging the park.

The Brazilian company has insisted that the project, in which Teikoku is a partner, will affect only 100 hectares of the Yasuni reserve, which borders Peru.

The Ecuadorian economy got a $1.1-billion boost from the confiscation of Occidental Petroleum's Block 15 in May 2006 and a new hydrocarbon tax, which together bumped up the country's total 2006 oil revenue to about $3.8 billion, say local analysts (OGJ, May 22, 2006, Newsletter).

The government's threat fits a pattern that some observers fear will spread following the Russian government's success in taking majority control of the Sakhalin-2 project after challenging the project on environmental grounds (OGJ, Jan. 15, 2007, p. 34).